How To Get Your Customers To Do Some of Your Marketing For You…

This works with better with services, but you can gear it to products with some creativity. This technique has been very useful for me. You can put it in your ads or coupons too…

Referrals are important for increasing sales. I keep hearing about how advertising passively online is becoming more pale compared to word of mouth referrals between friends and social networks.

So how do you encourage your customers to refer you to family and friends that might find your service useful?

Well, along with providing amazing service, why not reward customers that refer you? Many companies do this with their employees to fill new positions, but why not let your customers join in on the fun?

Offer a discount to customers that get you a sale by referring you

The discount could be a one time service for free, a permanent discount each time they buy your service, or a joint discount between your customer and who they referred.

To make it effective and profitable, calculate your cost per dollar of sale, i.e. how much you pay in marketing costs to increase your sale by 1 more customer.

Make the discount for each referral less than your cost per dollar of sale, but still large enough to encourage your customers to refer you.

Lets say for your current marketing budget you spend $300 to send out 1000 fliers, and on average 70 respond and from them and 30 buy your product or service.  Your cost per dollar of sale is $10 for each new customer ($300/30 sales)

Now if you offer a discount of less than $10 for each referral (or a marginal continuous discount that adds up to $10 on repeated purchases longer than the average lifetime value of your customers), then you’ve lowered your marketing budget per new sale and made a profit.

But customer referrals also save time and research costs, so make a dollar amount of your time and research costs. Your cost per dollar of sale will be higher and referrals will be more profitable to you and to your customers.

It’s reasonable win-win advertising. Do your homework to see how much a customer referral is really worth.

You know, just for fun and profit 🙂

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